December 30th, 2008

Happy Holidays from DeCarley Trading!

Nothing going on in the pits, but prices moving.

Unlike yesterday, market participants were provided with economic data; as we have been seeing in recent months the news was bond friendly.  Consumer Confidence was reported at a stunningly low level of 38, a far cry from estimates in the mid-40's.  The Chicago PMI came in slightly better than predictions but well into contraction territory at 34.1. 

Customer order flow is nearly non-existent, it seems as though the little trading that is being done is at the hands of commercials and funds.  In the meantime, we recommend that you stay away from the markets until the players return, likely well into next week. 

In the meantime, Treasury prices continue to be faithful to the trend.  Early morning selling pressure was quickly met with "bargain" buying.  I wouldn't be willing to lay money on the table, but I believe that the 30-year bond is destined for higher prices in the near-term.  Our first target is just above 144; should we be proven wrong,  support will likely be found near 137.  A break of near-term support cold lead to a move down to 129; however, we are expecting a rally before a correction can occur.

If you are following the 10-year note (which isn't a bad idea given the volatility in the T-Bond), we see resistance at 129'09 and expect the March futures contract to reach such levels in the coming week.  On the downside, support can be found in the mid-125's and again near 122. 

If you are participating in the Eurodollar recommendation, we are looking for higher prices and an opportunity to peel the long call option off with a nice profit.  Once this is done, the position will contain "naked" risk on the upside and hopefully meaningful profit potential on the upside.  Stay tuned. 

Treasury Bond and Note Option Trading Recommendations

**There is unlimited risk in naked option selling.

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Treasury Bond and Note Futures Trading Recommendations

**There is unlimited risk in trading futures.

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Eurodollar Futures Trading Recommendations

**There is unlimited risk in trading futures.

December 17 - Clients were recommended to Sell March futures near 98.84 and buy the March 9875 call for 21.  The total risk is $300 plus commissions and fees (2 of them), profit potential is theoretically unlimited, and this trade gives you three months in the market!

*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.

There is substantial risk of loss in trading futures and options.